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Tesla & The New Economics Of The Coming Renewable Energy Boom

I don’t need to tell anyone of the importance of Tesla’s expansion into home battery technology. A home battery lets you store solar energy to use when the sun isn’t shining, which is a really, really major thing in terms of power distribution. As I’ve been pointing out for years, this is the crucial missing link between photovoltaic cells being a rapidly, rapidly cheapening technology with a lot of rollout potential, and photovoltaic cells being the major source for the world’s power. As I predicted in The Week in 2013:

The promising trends in technology and cost suggest much more than renewable energy becoming the fastest growing energy source in the next 30 years. They suggest that renewables will grow to be the number one energy source in the United States and the world in the next 30 or 40 years.

I’d say that that was actually an overly conservative projection. I now foresee solar to be number one in the next twenty, if not the next ten years.

It’s nice to live in the knowledge that renewable energy will overcome problems posed by diminishing oil reserves and (at least) mitigate anthropogenic climate change. It’s nice to know that as solar efficiencies continue to increase and solar manufacturing costs continue to fall that the long term trend for energy costs is down.

And you can do a heck of a lot of cool things with cheap, decentralized energy, like heating and lighting your home, manufacturing goods and technology and food and tools, and powering computers and artificial intelligence.

This, in my view, is the furnace to power the next fifty or a hundred years of soaring mid-20th century style economic growth. This is the beginning of an energy-driven economic supercycle — which takes us from the era of handheld computing to the era of building asteroid mining space stations and extraterrestrial colonies and maybe even interstellar spacecraft. It’s the main reason why I switched from bearish to bullish in 2013.

But what I really want to know is how to make money out of this trend. If photovoltaic cells and batteries are the new crude oil, coal, gasoline and natural gas (etc), does that mean Musk’s firms (Tesla, SolarCity, SpaceX, etc) are going to be the next Exxon-Mobil or Shell or Gazprom?

Maybe. But I’d tend to see renewable energy and emerging tech index funds as a slightly smarter bet. The trouble is that we’re at a very early stage in the supercycle.

An imperfect analogy: Xerox made an operating system akin to Windows years before Microsoft and Apple did, but Microsoft and Apple were the ones who reaped the bigger rewards. There are a whole load of factors that could dramatically affect which renewable energy systems are the ones that dominate the market: interface, battery-photovoltaic cell integration, price per unit of energy, price per unit of storage, durability and probably some others. And also a slew of more superficial factors such as marketing. If this is going to be as big as I think it is there will be a lot of competition from outside the renewables sector not least from firms like Google, and Apple and Facebook and Samsung as well as from older energy giants like BP, Shell and Exxon-Mobil.

For now, of course, Musk does seem to be establishing himself as the market leader and trendsetter in much the way Steve Jobs once did. But that could all change. It’s even not just a matter of competing firms. Just as the internet decentralized information distribution, and solar is on the cusp of decentralizing energy production, the whole manufacturing and (I’d argue) product design paradigm is edging closer to being transformed by another set of emergent technologies: 3-D printers and home manufacturing. Maybe as home manufacturing begins to become more prominent, open-source collaborative product and component design will beat out the current proprietary model.

The main takeaway here seems to be that this is an incredibly exciting time to be alive. We’re all set to get a lot richer from this, whether or not we bought Tesla at an early stage, just as people in the early 20th century didn’t have to buy Standard Oil shares to do well from that other energy revolution.

20 thoughts on “Tesla & The New Economics Of The Coming Renewable Energy Boom”

Aziz, regarding solar, you may want to take a look at ASYS on the NASDAQ; if you are interested, I can send you a report we prepared on it a few years back. It is an interesting business, analogous to buying a company that makes equipment used in oil production and refining fifty years ago, e.g., GHM.

Batteries, even those made by Tesla, have a finite life span. Ultimately, this is a cost issue. Storing electricity for future use adds to the cost of solar electricity. I have a small solar system on my roof (3.6 KW) which is tied to the grid without any battery storage. The system was installed 10 years ago and performed so far flawlessly. During those 10 years, there was only one week where I wished that my system had a battery storage. That was during a power outage which lasted precisely one week. During the other 500 weeks since installing the system, I was better off by dumping the excess electricity into the grid. My solution for future power outages is not investing many thousands into questionable batteries, but buying a small gasoline operated generator as an insurance against future power outages.

The way I see it batteries are not going to eliminate the grid, on the contrary.
How about the grid being composed of solar/wind/hydro/what ever as primary inputs while storage will be made primarily by producing hydrogen during peak hours in parallel with stoking up to the brim privately owned ‘Tesla’ batteries? This way ‘secondary’/reserve power will come mainly from the hydrogen cell powered cars which will be connected to the grid and act as generators during ‘rest hours’ while only the high peaks will be covered by batteries.

Agreed. I am trying to live off the grid and the main issue is battery storage. 12 volt is sufficient to survive on but you need more power volts for freezer/fridges, washing machines, kettles and toasters.